Does anybody really know the motivation behind State Farm’s announcement that it plans to leave Florida? The executives in State Farm’s Bloomington, Illinois, headquarters do, but I doubt many outside of that office understand what State Farm hopes to gain from their announcement.
This lack of transparency regarding State Farm’s motivations is the reason Florida should immediately conduct a full investigation of State Farm’s actions. If State Farm’s announcement is honest, it should have no fear of this investigation.
The purported reason is that State Farm cannot make money at the current premium rates. As indicated in my prior posts, (State Farm’s Freakanomics, State Farm’s Power Play And Propaganda Ploy, The Devil Is In The Details), an administrative judge found differently. He even called the transactions between State Farm Florida and State Farm Mutual, a sham. One must question whether the public reason is a sham as well.
State Farm’s motivation may include:
- State Farm truly is losing money.
- State Farm wants to bully the Office of Insurance Regulation into allowing higher rates.
- State Farm wants to use Florida as an example to bully other states into rate decisions and policy decisions favorable to State Farm.
- State Farm wants to force favorable federal government corporate charter legislation.
- State Farm and others in the old guard property insurance oligopoly want to shock the government into implementing a federal catastrophe reinsurance program whereby the old guard oligopoly will not lose business to new start up companies that will compete for their auto business.
- State Farm wants to leave the coastal property insurance markets because the new models of enterprise risk management suggest more profitable enterprises.
Whatever the reason, Floridians deserve a better explanation. Florida government officials should obtain all the internal emails and memos State Farm executives reviewed, analyzed and produced when making this decision. One must assume that State Farm, being as well run as it is, put significant analysis and thought into this decision.